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Two Loop office building owners face potential loan defaults

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Both loans were packaged and sold to investors in commercial mortgage-backed securities, revealing much of their financial performance information.

The building could join the wave of pain that has hit the loop office market since the launch of the COVID-19 pandemic.The rise of remote work has weakened and driven the demand for workspaces, especially in older and outdated properties. The vacancy rate of downtown offices is the highest ever. It reduced the landlord’s bottom line, which in turn pushed down the value of the property, making it difficult for many owners to refinance their buildings. Some did not face foreclosure proceedings or dispute in court, but simply handed over their property to the lender.

Neither Jackson nor LaSalle building owners have stopped paying their loans, according to Bloomberg data related to mortgages. However, the annual debt repayment of each building is much higher than the net operating profit.

The 198,193-square-foot Jacksonville is owned by a Chicago-based Mark Realty venture. Paid $ 22.3 million The building was almost completely rented at the time and remained in that state for most of Mark’s ownership.

mark For sale the building In February 2020, at an offering that was expected to win nearly $ 27 million in bids at the time. The marketing flyer assembled it as an opportunity to bet on the fast-growing southwest corner of the loop and lease a block of 40,000 square feet of office that will be emptied by the end of 2020 by financial services firm Marex Spectron.

Then a pandemic occurred. According to Bloomberg loan data, the property was not traded and its occupancy dropped to just 62% last year. According to loan data, the building’s net cash flow in 2021 was $ 629,000, well below Mark’s annual debt repayment of $ 1 million.

The loan was transferred to an LNR partner of a special servicer based in Miami Beach, Florida this month due to “imminent defaults due to cash flow issues,” according to a Bloomberg report. Mortgages are expected to mature in October 2023.

A spokesman for Mark Realty declined to comment, and a spokesman for LNR Partners, who oversees the loan on behalf of CMBS bondholders, declined to comment.

The 129-year-old LaSalle Street building is owned by Chicago-based real estate investor Ruben Espinoza’s venture and was purchased in 2019 for $ 22 million.

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